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Pension Funds

Wilshire: City and county pension plan funding ratio rises to 71% in 2017

The aggregate funding ratio of city and county pension plans rose 4 percentage points in 2017 to 71%, said a report from Wilshire Consulting.

Assets of the 96 city and county pension funds that reported actuarial data on or after June 30, 2017, totaled $514.8 billion, up 11% from the previous year. Liabilities also rose to $725.4 billion, up 4% from the previous year.

Ned McGuire, managing director and a member of the pension risk solutions group, said in a news release that the increase in global equity values for the year ended June 30, 2017, was a primary driver of the improved funding levels. Strong investment returns and contributions also drove up asset values for the year.

"With that, we found that 93% of the plans in this year's study have market value of assets less than pension liabilities or are underfunded," Mr. McGuire added.

The average asset allocation for city and county pension funds was 30% U.S. equities, 23.2% U.S. fixed income, 20.6% non-U.S. equities, 11% other assets, 7.3% real estate, 6.3% private equity, and 1.6% non-U.S. fixed income.

"Discount rates have trended lower over the past several years and continued for this year's study as nearly half of the plans lowered their discount rate," Mr. McGuire added. "The range for discount rates this year is 5.13% to 8.5% with a median of 7.25%, which is down 25 basis points from last year."

Wilshire Consulting is the institutional investment advisory and outsourced CIO unit of Wilshire Associates.

The full report is on Wilshire's website.